Exam 2 PINK Econ 251 spring 2011

Exam 2 PINK Econ 251 spring 2011 - D TC A MR MR 30 40 12 38...

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ATC MR 40 38 30 20 20 30 Q P AVC D MR 30 12 24 4 P 20 18 15 25 Q ECON 251 Exam 2 Pink Spring 2011 0001 Blanchard, Kelly Tuesday / Thursday 10:30 – 11:45 0002 Blanchard, Kelly Tuesday / Thursday 1:30 – 2:45 0003 Blanchard, Kelly Tuesday / Thursday 4:30 – 5:45 0004 Lopresti, John Monday / Wednesday / Friday 8:30 – 9:20 0005 Yang, Lihong Monday / Wednesday / Friday 9:30 – 10:20 0006 Yang, Lihong Monday / Wednesday / Friday 10:30 – 11:20 0007 Lopresti, John Monday / Wednesday / Friday 11:30 – 12:20 Econ 251 Spring 2011 Exam 2 PINK Page 1 of 15

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1. Andy spends his entire income on Coca Cola and orange juice. Suppose that the price of Coke is \$0.50, and the price of orange juice is \$1.50. If the quantity of Coke is graphed on y-axis and the quantity of juice is graphed on the x-axis, what is the slope of the budget line? a. -3 b. -1/3 c. -0.75 d. -8.5 2. Andy’s income is \$4. His total utility derived drinking Coca Cola and drinking orange juice is shown in the chart below. What is Andy’s marginal utility per dollar spent on the 4 th Coke? (Assume prices as given above.) Quantity Utility from Coke Utility from Juice 0 0 0 1 12 24 2 22 34 3 30 40 4 36 45 5 40 49 6 42 50 a. 6 b. 9 c. 12 d. 15 3. Given the same information above, when Andy maximizes his utility given his budget, how much utility does Andy get? a. 56 b. 64 c. 84 d. 110 4. Miles has a monthly income of \$100 to spend on bird watching trips and fishing trips. The price of one bird watching trip is \$20 and the price of one fishing trip is \$10. Suppose Miles chooses a consumption bundle such that he is spending all of his money, the marginal utility of his last bird watching is 200 and the marginal utility of his last fishing trip is 75. Based on this information, how should Miles Econ 251 Spring 2011 Exam 2 PINK Page 2 of 15
change his consumption of bird watching trips and fishing trips, if at all, to maximize his utility? a. Miles should buy more bird watching trips and fewer fishing trips b. Miles should buy fewer bird watching trips and more fishing trips c. Miles should buy fewer bird watching trips and fewer fishing trips d. Miles should not make any changes because he is already maximizing his utility 5. If bird watching trips are an inferior good for Miles, we would expect a decrease in the price of bird watching trips to result in which of the following when Miles maximizes his utility? a. An income effect that increases the quantity of bird watching trips he purchases and a substitution effect that increases the quantity of bird watching trips he purchases.

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Exam 2 PINK Econ 251 spring 2011 - D TC A MR MR 30 40 12 38...

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